Washington - The US Federal Reserve on Wednesday kept interest rates at their historic low of near 0 per cent as the world's largest economy embarks on a slow recovery from recession. The central bank's board said economic conditions "continued to pick up" since its last meeting in September but were likely to "remain weak for a time."
The Fed noted that the housing sector was improving and consumer spending, which accounts for about two-thirds of US economic output, was also expanding. But the central bank said businesses were still cutting jobs and household spending "remains constrained."
Government figures last week showed the US economy grew an annualized 3.5 per cent in the July-September period, marking the first quarterly growth in a year and likely ending the country's worst recession in seven decades.
But the US unemployment rate currently sits at a 28-year-high of 9.8 per cent and is not expected to begin falling until some time next year. New monthly jobless figures will be released Friday.
"Household spending appears to be expanding, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit," the Fed board said in a statement.
The Fed's benchmark federal funds rate has been kept at a record low of 0-0.25 per cent since December 2008, part of an unprecedented effort by the central bank to revive the economy and stabilize the financial system.
Given the sluggish economy, the Fed said it would continue keeping rates at the record low for "an extended period." The central bank said it expected inflation to "remain subdued" for a while even as rates remain low.
The unanimous decision came as little surprise to economists, though some expected language suggesting when interest rates might be raised again. Some quarters have begun calling for a mild tightening of monetary policy as the economy is moving towards recovery.
The central bank has also injected about 1 trillion dollars into banks and mortgage programmes to stabilize the financial system in the past year. Some of those programmes are likely to be wound down in the first half of 2010.
The Fed said it still planned to buy 1.25 trillion dollars of mortgage-backed securities by the end of the first quarter of next year in a bid to boost lending in the economy. It would also purchase 175 billion dollars in government debt, down from 200 billion dollars announced earlier this year.
